"The International Downer," American Affinia Group (hereinafter referred to as "Affinia") changed its corporate strategy within half a year. Before that, it purchased brake parts and other auto parts in China to sell back to the United States to earn the difference. Today, Affinia is preparing to sell its brake pads and chassis components to China. What prompted Affinia to make a change is that the American auto parts market has shrunk dramatically.

“The performance of parts and components companies directly supporting the auto companies has dropped by 40% to 50%. Before 2011, I could not see any signs of recovery in the United States.” Richard A. Andrews Vice President, Asia Pacific, Richard Andrew Picharek told CBN reporters.

With the bankruptcy and reorganization of GM and Chrysler, the auto parts company's living conditions are also plummeting. As the saying goes, "One glory and one glory, one loss and one loss."

In fact, more and more auto parts suppliers are flocking to China. German Webster, Tenneco, and Arcelor-Mittal have already taken the lead and more companies are seeking opportunities to enter. Seeing North America’s parts and components business closed down, China is undoubtedly the best place to go.

Flock to China

Timothy Manganello, chief executive of BorgWarner, said at a national summit sponsored by the Detroit Economic Club last Monday: “For supplier systems in the United States and even European and global supplier systems, The next 3 to 10 weeks are very critical."

ArvinMeritor Chairman and Chief Executive Officer Chip McClure said that although the entire US supply chain system will not collapse, more suppliers may go bankrupt (including bankruptcy protection) in the future, especially those who rely heavily on general and Chrysler's two client companies.

In fact, since last year, about 20 parts suppliers in the United States have gone bankrupt (including bankruptcy protection), including the well-known Delphi, Visteon, etc.

Compared to auto parts suppliers that are directly supported by companies such as GM, Ford, and Toyota, Affinia has the advantage of facing customers who already have cars, and the main sales are from routine maintenance. Therefore, sales will not be reduced due to the decline in GM and Ford sales.

Affinia is one of the largest suppliers of automotive aftermarket in the United States. It mainly provides Rexto brand brake systems, Vickers filters and other chassis products. Its brake system ranks first in the US automotive aftermarket market share and chassis products second.

In 2008, in the context of the overall decline in the overall performance of the US auto parts industry, Affinia’s global sales continued to grow by 2% year-on-year to US$2.17 billion, and its operating profit margin also exceeded 10%. However, since 2009, as the impact of the subprime mortgage crisis has widened, American owners have gradually reduced the number of car maintenance and repairs, resulting in Affinia’s rapid decline of 13% in the first quarter and having to find other growth options to enter the Chinese market. It becomes the most realistic and best choice.

Webster is another representative of the global auto parts business influx into China. The company is headquartered in Germany, is the world's largest manufacturer of automotive skylights, business almost every corner of the world, with 46 global subsidiaries. But its experience with Affinia, the decline in the European and American automotive market has drastically lowered its operating performance. As a breakthrough approach, Wei Buster also chose China.

On July 17 and 18, Weibaste started construction of new plants in Changchun and Shanghai, respectively, and the cumulative annual production capacity in China will reach 2 million units. Weibuste currently accounts for 60% of China's auto sunroof market, and in 2008 it sold more than 1.2 million units in China.

In addition, the Tenneco Group of the United States established a joint venture with Beijing Hainachuan Auto Parts Corp. last week to prepare an automobile exhaust emission control system in Beijing. Arcelor-Mittal signed a car and electrical steel project with a total investment of 10 billion yuan in Hunan. Marc Northork, Consultant of the Automotive Industry Division of the British International Industry Department, and Cui Yingbo, Canadian Ambassador to China, recently appeared in Beijing and Jinan, Shandong, hoping to seek cooperation opportunities for their own car companies.

Risk remains

"Competition with low-priced products is my biggest concern." Richard Andrew admits that taking Alessandra as an example, Affinia has to face nearly 1800 competitors in China, and almost all Chinese companies produce Brake pads are cheaper than Rexto. Affinia is not a well-known company in China.

In addition to the price, Affinia also faces a new market environment and game rules. Foreign-funded parts and components companies have complained on more than one occasion that Chinese buyers are too "human relations," not simply relying on products and services to decide whether to buy. Disorderly competition, lack of standardized market operations, and chaos in marketing and management are the words that foreign-funded parts companies often use to describe Chinese companies, but they have to adapt now.

Compared with local Chinese companies, the advantages of foreign companies are focused on the formulation of product quality, technology, and long-term strategies. However, the quality of China's parts and components has also increased, and it has begun to enter such sophisticated systems as suspension. Pan Keqiang, executive vice president of Asia Pacific and Africa for Ford Motor Co., said that China's auto parts are becoming more and more competitive; the overall quality of their products is constantly improving.

However, after all, China is already the world's largest auto market. An executive from Roland Berger Consulting pointed out that in 2008 China's spare parts industry was 950 billion yuan, and it is expected to reach 2.5 trillion yuan by 2015. In the past four years, China's parts industry has grown by 30%. While the recovery in the North American and European markets will take at least two years, China is becoming the only place for global component suppliers.

For the current overall plight of US auto parts suppliers, Teng Bole, secretary general of the China Automotive Industry Advisory Committee, told CBN reporters that overall, this is an opportunity for Chinese parts and components companies, but looking at how to grasp them should also be seen. To it contains the challenges.

Sun Jian, a global partner of Kearney Consulting, told CBN reporters that it is now the best time for China's spare parts companies to venture out of the country. Through mergers and acquisitions, they will acquire core technologies of some parts and components, or enter overseas OEM supporting systems. Geely’s acquisition of DSI Australia’s auto transmission company and Weichai’s acquisition of Boduuan’s engine company in France are typical cases.